University of Texas at Arlington Platform Strategy Symposium 2017 Discussion: Dynamic Platform Competition: Optimal Pricing and Piggybacking under Network Effects Yifan Dou and D. J. Wu by Jennifer Jie Zhang University of Texas at Arlington

Two-sided Platform

Summary of the Study The development of a successfully platform businesses the chicken-and-egg problem Piggybacking strategy The model considers (1) Dynamic analysis of the network evolution How the platform owner strategically prices the two sides while building the platform over time? (2) Competitive platforms How to differentiate with the competing platform (3) Many extensions Three periods model Asymmetric discounting factors changing prices over time to strategically build the two-sided market in order to optimize the total profits

Dynamic analysis of the network evolution Settings: Multi-homing providers Single-homing customers Symmetric duopoly Pricing: compared with a single-period model, on the customer side: both platforms lower period-1 price, and increase period-2 price On the provider side: period-1 price remains unchanged, period 2 price change δ(α-β)/8. Comments: Equation (2): there is no within-network externality on the provider side (qdki is independent of other providers’ number or pricing) More results: how’s the growth of the market sizes on both sides of the platform over time? How do the assumptions affect the subsidizing strategy?

Piggybacking strategy Findings under the dynamic asymmetric duopoly model: Piggybacking may cause price wars between the two platforms or benefit both depending on the relative values of α and β Comments: Piggybacking strategy normally requires a contractual or affiliation relationship -- related to the cost structure How does competition affect the piggybacking strategy – compared with the monopolist case

Summary of Comments From the baseline (single-period monopoly) model, add the competition between (asymmetric) platforms Dynamic effect (2-period, 3-period) Nonprice controls: piggybacking Show how the dynamic pricing, platform competition, nonprice controls affect the market size, pricing, profits, interactions between the three players in the market